Deeply flawed ‘soda tax’ rife with unintended consequences
Recently policymakers and pundits have mused about a possible “soda tax” on sugar-sweetened beverages to fight obesity and other-health related issues in Canada. According to Mark Holland, MP for Ajax, a soda tax will “push consumers away from purchasing them” and help combat obesity.
But Holland’s response reveals a lack of understanding of the relationship between consumption of specific foods and drinks and obesity, and the other serious problems with this tax. The truth is that a soda tax is largely ineffective and comes with unintended consequences.
Obesity remains a serious health issue in Canada. And yes, being overweight or obese is often the result of consuming too many calories combined with not enough activity. However, eating sugary foods in moderation when balanced with other foods and exercise will not necessarily make a person overweight or lead to illnesses associated with excess weight. This raises a serious problem with a soda tax—everyone must pay it regardless of their overall health.
Moreover, consider the ability of consumers to adopt substitutes, which can make the soda tax ineffective as a tool to reduce total consumption. Soda taxes can cause people to move away from carbonated soft drinks to alternative beverages that are either high in calories or sugars. A 2010 study in the Journal of Public Economics observed this effect after analyzing the impact of soda taxation in the United States on youth over two decades. The authors found that children and adolescents increased their consumption of other less nutritious options to offset their reduced consumption of soda in response to the tax. For example, if more people drink juices and chocolate milk in place of water, are we really reducing excess caloric and sugar intake?
It’s worthwhile to consider how similar “fat taxes”—surcharges imposed on fattening food products—have been implemented in practice. For example, in Denmark, the government introduced a tax on saturated fat in food products in 2011. Indeed, some consumers changed their behaviour by switching to lower fat alternatives. But others changed their shopping habits to buy fatty foods in lower-priced discount stores rather than more expensive supermarkets. Additionally, some consumers who lived near the border started grocery shopping in neighbouring countries that didn’t impose the tax. The policy was eventually abandoned after just 15 months. Moreover, evidence from other jurisdictions (including Mexico) shows that additional taxes on sugary drinks rarely achieve their goal of reducing caloric intake in any meaningful way.
Finally, soda taxes also come with unintended consequences that may be particularly harmful for some. For example, consider those with Type 1 Diabetes. Living with Type 1 Diabetes includes carbohydrate counting and taking insulin injections to avoid extreme low and high blood sugar levels. Low blood sugar is treated with fast-acting carbohydrates such as fruit juice, regular soda or candy.
Puzzlingly, Diabetes Canada has advocated for a tax on sugary beverages. Meanwhile, its own guidelines acknowledge that drinking soda can treat low blood sugar. In fact, Diabetes Canada explicitly states that low blood sugar can be treated with two-thirds of a cup of juice or regular soft drink. Clearly, Canadians living with Type 1 Diabetes can’t limit sweets because sugary beverages can be life-sustaining. And since the soda tax would raise prices on essential products for people with Type 1 Diabetes, this means their daily lives could also become more expensive.
Simply put, Canadians should be able to choose what they put in their grocery carts without an ineffective soda tax in the way. Clearly, policymakers should continue to oppose calls for a soda tax.
Subscribe to the Fraser Institute
Get the latest news from the Fraser Institute on the latest research studies, news and events.